COLLEGESOURCE, INC. v. ACADEMYONE, INC.
Filing
133
MEMORANDUM AND/OR OPINION RE: PLAINTIFF'S MOTION TO DISMISS WITHOUT PREJUDICE, TRANSFER OR STAY (DOC. NO.99) AND DEFNENDANTS' CROSS-MOTION TO ENJOIN (DOC. NO.104). SIGNED BY HONORABLE MARY A. MCLAUGHLIN ON 10/28/2011. 10/31/2011 ENTERED AND COPIES E-MAILED.(kk, )
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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
COLLEGESOURCE, INC.
:
:
:
:
:
v.
ACADEMYONE, INC., et al.
CIVIL ACTION
NO. 10-3542
MEMORANDUM
McLaughlin, J.
October 28, 2011
This case involves two companies that provide online
college transfer services.
The plaintiff CollegeSource has
accused the defendant AcademyOne of republishing course catalogs
and course information that CollegeSource digitized and made
available to its customers.
The parties’ dispute has spawned
several lawsuits, the first in the Southern District of
California (hereinafter the “California Action”),1 one before
Judge Padova in this district,2 and the instant lawsuit.
CollegeSource moves to dismiss this case without
prejudice, or, alternatively, to transfer the case to the
Southern District of California or to stay this case pending the
resolution of the California Action.
AcademyOne cross-moves to
enjoin CollegeSource from litigating the California Action.
Court denies both motions.
1
CollegeSource, Inc. v. AcademyOne, Inc., No. 08-1987,
(S.D. Cal. filed October 27, 2008).
2
AcademyOne, Inc. v. CollegeSource, Inc., No. 08-5707,
(E.D. Pa. filed December 8, 2008).
The
I.
Procedural History
A.
The California Action
On October 27, 2008, CollegeSource sued AcademyOne in
the California Action.
CollegeSource brought five claims that
are also pending in this suit: (1) violation of the U.S. Computer
Fraud and Abuse Act; (2) breach of contract; (3) unjust
enrichment; (4) trademark infringement; and (5) unfair
competition under the Lanham Act.
In addition, CollegeSource
brought claims for misappropriation and unfair competition under
California law and violation of the California Computer Crimes
Act.
AcademyOne moved to dismiss the California Action for lack
of personal jurisdiction.
After the court ordered and the
parties conducted jurisdictional discovery, CollegeSource opposed
the motion to dismiss.
Meanwhile, on December 8, 2008, AcademyOne sued
CollegeSource in the Eastern District of Pennsylvania, bringing
claims for false advertising, trademark infringement, and
cybersquatting.
In that case, Judge Padova granted summary
judgment on all claims in favor of CollegeSource.
AcademyOne,
Inc. v. CollegeSource, Inc., No. 08-570, 2009 WL 5184491, at *7,
*16-*17 (E.D. Pa. Dec. 21, 2009).
On August 24, 2009, the district court in the
California Action concluded that it lacked personal jurisdiction
over AcademyOne and dismissed CollegeSource’s complaint.
2
See
CollegeSource, Inc. v. AcademyOne, Inc., No. 08-1987, 2009 WL
2705426, at *7 (S.D. Cal. Aug. 24, 2009).
CollegeSource timely
appealed the dismissal to the Ninth Circuit.
B.
The Instant Lawsuit
While the Ninth Circuit appeal was pending, and after
AcademyOne refused to agree to toll the statute of limitations,
CollegeSource initiated this lawsuit on July 20, 2010 and filed
an ex parte motion for a temporary restraining order to preserve
evidence on AcademyOne’s computers.
See Decl. of Darren Quinn in
Supp. of Mot. To Dismiss, Transfer or Stay (“Quinn Decl.”), Ex.
E.
The Court denied the motion and instructed both parties not
to destroy any potentially relevant information.
On October 19, 2010, the defendants moved to dismiss
several counts of CollegeSource’s amended complaint.
On December
6, 2010, before the defendants’ motion to dismiss was decided,
CollegeSource moved for a preliminary injunction.
The Court
scheduled a hearing on the motion for preliminary injunction as
well as a pre-hearing conference in chambers.
At the pre-hearing conference on January 18, 2011, the
Court inquired about the status of the Ninth Circuit appeal in
the California Action.
Counsel for defendants attests and
CollegeSource admits that CollegeSource declared its intention to
go forward with litigating this case regardless of the outcome of
3
the Ninth Circuit appeal in California.
See Opp. to
CollegeSource’s Mot. To Dismiss Without Prej., Transfer, or Stay
(“AcademyOne Opp.”), Ex. 1 (“Landau Decl.”) ¶ 5; Cons. Opp. to
AcademyOne’s Cross-Mot. To Enjoin CollegeSource and Reply in
Supp. of CollegeSource’s Mot. To Dismiss (“CollegeSource Reply
and Opp.”) at 12.
With the understanding that the parties would
definitely proceed in this district, the Court moved forward with
the case.
On January 24, 2011, the Court held a preliminary
injunction hearing, took testimony from several witnesses, and
accepted exhibits into evidence.
Following oral argument on
January 26, 2011, and after considering the parties’ proposed
findings of fact and conclusions of law, the Court denied the
preliminary injunction on April 22, 2011.
Three days later, the Court held a Rule 16 conference
with the parties.
On May 18, 2011, the Court granted the
defendants’ motion to dismiss the RICO claims from the complaint.
The Court also issued a scheduling order setting deadlines for
discovery and dispositive motions and referring the case to
Magistrate Judge Elizabeth T. Hey to hold a settlement
conference.
Magistrate Judge Hey met with the parties on October
4, 2011 and held a telephone status conference regarding
settlement on October 13, 2011.
Starting in June 2011, the parties proceeded with
4
discovery pursuant to the Court’s scheduling order.
Decl. ¶¶ 7-8, 11.
motion practice.
See Landau
In the meantime, the parties continued with
AcademyOne filed a motion for sanctions
pursuant to Federal Rule of Civil Procedure 11, and CollegeSource
filed a motion to strike AcademyOne’s affirmative defenses.
Court denied both motions.
The
The Court granted the parties’ joint
motions for protective order and for extension of time to
complete discovery.
2011.
The fact discovery deadline was October 14,
The Court also considered and decided two motions to
compel and a motion to re-designate documents as “confidential”
filed by AcademyOne, as well as three motions to compel filed by
CollegeSource.
A motion for protective order is currently
pending before the Court as of the date of this memorandum.
C.
The Ninth Circuit Decision
On August 8, 2011, the Ninth Circuit issued an opinion
holding that AcademyOne is subject to specific personal
jurisdiction in California, reversing the dismissal of the case,
and remanding to the Southern District of California.
CollegeSource, Inc. v. AcademyOne, Inc., 653 F.3d 1066 (9th Cir.
2011).
CollegeSource advised this Court by letter dated August
15, 2011 of the Ninth Circuit opinion and its intention to
litigate in California.
CollegeSource then filed the instant
motion to dismiss this case without prejudice, transfer to
5
California, or stay the action.
AcademyOne opposed the motion
and cross-moved to enjoin CollegeSource from litigating the
California Action.
II.
Analysis
A.
The First-Filed Rule
The first-filed rule gives a court the power to enjoin
the subsequent prosecution of proceedings involving the same
parties and issues already before another district court.
EEOC
v. Univ. of Pa., 850 F.2d 969, 971 (3d Cir. 1988) (citing
Triangle Conduit & Cable Co., Inc. v. Nat’l Elec. Prods. Corp.,
125 F.2d 1008, 1009 (3d Cir.), cert. denied, 316 U.S. 676
(1942)).
The rule encourages sound judicial administration,
promotes comity among federal courts of equal rank, avoids
placing an unnecessary burden on the judiciary, and avoids
conflicting judgments.
EEOC, 850 F.2d at 971, 977.
See also
Church of Scientology v. U.S. Dep’t of Army, 611 F.2d 738, 750
(9th Cir. 1979).
The Third Circuit has explained, however, that the
first-filed rule “is not a mandate directing wooden application
of the rule without regard to rare or extraordinary
circumstances, inequitable conduct, bad faith, or forum
shopping.”
EEOC, 850 F.2d at 972.
See also Pacesetter Sys.,
Inc. v. Medtronic, Inc., 678 F.2d 93, 95 (9th Cir. 1982) (noting
6
that first-filed rule “is not a rigid or inflexible rule to be
mechanically applied, but rather is to be applied with a view to
the dictates of sound judicial administration”).
Rather,
“[d]istrict courts have always had discretion to retain
jurisdiction given appropriate circumstances justifying departure
from the first-filed rule.”
Id.
In EEOC, the Third Circuit recognized several such
appropriate circumstances justifying departure from the firstfiled rule: (1) bad faith or forum shopping by the parties; (2)
the second-filed action has developed further than the initial
suit; and (3) the first-filing party instituted suit in
anticipation of the opposing party’s imminent suit in another,
less favorable forum.
850 F.2d at 976-77 (citing cases).
See
also FMC Corp. v. AMVAC Chem. Corp., 379 F. Supp. 2d 733, 743-44
(E.D. Pa. 2005) (anticipatory filing); One World Botanicals Ltd.
v. Gulf Coast Nutritionals, Inc., 987 F. Supp. 317, 329-30
(D.N.J. 1997) (anticipatory filing and preventing waste of
judicial resources); Optical Recording Corp. v. Capitol-EMI
Music, Inc., 803 F. Supp. 971, 974 (D. Del. 1992) (court’s
“familiarity with the subject matter of the litigation will
reduce the expenditure of judicial resources,” justifying
departure from first-filed rule); PhotoMedex, Inc. v. St. Paul
Fire & Marine Ins. Co., No. 09-0896, 2009 WL 2326750, at *5-8
(E.D. Pa. July 28, 2009) (forum shopping and anticipatory
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filing); Automotive Service Ass’n v. Rockland Exposition, Inc.,
No. 08-3186, 2008 WL 5244282, at *5 (D.N.J. Dec. 12, 2008)
(second-filed suit developed further).
B.
Plaintiff’s Motion to Dismiss Without Prejudice,
Transfer, or Stay
Although the first-filed rule generally serves the
purpose of promoting efficiency and should not be disregarded
lightly, the Court finds in this case that circumstances warrant
departure from the rule.
Furthermore, the proceedings in this
Court have developed to the point where a dismissal without
prejudice or transfer of venue would be a waste of judicial
resources.
1.
Application of the First-Filed Rule
Courts have declined to apply the first-filed rule
where the proceedings in the second-filed action have developed
considerably further than in the first-filed California Action.
See Orthmann v. Apple River Campground, Inc., 765 F.2d 119, 120
(8th Cir. 1985); Church of Scientology v. U.S. Dep’t of Army, 611
F.2d 738, 749-50 (9th Cir. 1979).
Such is the case here.
As set forth above, this case has advanced
significantly on the merits.
The Court has decided a motion to
dismiss and a motion for preliminary injunction, including
presiding over a lengthy preliminary injunction hearing.
8
In
addition, the Court has decided a motion for sanctions, a motion
to strike affirmative defenses, and six discovery motions.
The
fact discovery deadline has passed, and a seventh discovery
motion is under consideration.
In short, the Court has developed familiarity with the
legal and factual issues of the merits in this case.
In
addition, Magistrate Judge Hey has expended time and energy into
overseeing settlement negotiations between the parties.
It makes
little sense for another court to retread the same ground.
Therefore, although the court in the California Action presided
over jurisdictional discovery and decided a motion to dismiss for
lack of personal jurisdiction, judicial economy would best be
served by declining to apply the first-filed rule in this case.
Declining to apply the first-filed rule presents the
potential problem of duplicative litigation, but the problem is
of CollegeSource’s own making.
CollegeSource was within its
rights to file this suit to preserve its claims given
AcademyOne’s refusal to toll the statute of limitations.
However, judicial economy would have best been served had
CollegeSource moved to stay this action pending the Ninth
Circuit’s decision, as the plaintiff did in Orthmann.
765 F.2d
at 120.
Instead, CollegeSource affirmatively represented to the
Court that it intended to continue litigating this case no matter
9
the outcome of the appeal.
The parties proceeded and expended
time and resources accordingly, as did the Court.
It would be
unfair to allow the plaintiff to change course after the
defendants bore the expense and burden of litigating in this
forum.
CollegeSource claims that counsel had not yet discussed
the issue with CollegeSource when he made the oral representation
to the Court in the pre-hearing conference.
CollegeSource also
argues that “new facts” have been discovered since the
representation that warranted a change of forum.
CollegeSource Reply and Opp. at 12.
See
AcademyOne accuses
CollegeSource of forum-shopping, manipulating venue in bad faith,
and attempting to circumvent this Court’s adverse orders against
it.
See AcademyOne Opp. at 14-15.
The Court expresses no view of CollegeSource’s
motivations for pursuing litigation in California.
However, the
Court notes that CollegeSource did not specify what “new facts”
have been discovered.
Nor did CollegeSource explain or inform
the Court of its change of heart at any point subsequent to the
pre-hearing conference in January.
Even after the Court denied CollegeSource’s motion for
preliminary injunction, which relief requested might arguably
have justified not seeking to stay this action, CollegeSource
behaved consistently with its original stated intention to
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continue litigating in this district.
To allow CollegeSource to
now abandon this litigation in favor of the California Action
would be contrary to principles of fairness, comity, and
efficiency.
The Court therefore finds that the circumstances
warrant departure from the first-filed rule.
2.
Discretionary Decision to Dismiss, Transfer, or
Stay
A motion for voluntary dismissal under Federal Rule of
Civil Procedure 41(a)(2) lies within the sound discretion of the
district court.
United States v. Eighteen Various Firearms, 148
F.R.D. 530, 531 (E.D. Pa. 1993); Dodge-Regupol, Inc. v. RB Rubber
Prods., Inc., 585 F. Supp. 2d 645, 652 (M.D. Pa. 2008).
Similarly, 28 U.S.C. § 1404(a) vests district courts with “broad
discretion to determine, on an individualized, case-by-case
basis, whether convenience and fairness considerations weigh in
favor of transfer.”
Jumara v. State Farm Ins. Co., 55 F.3d 873,
883 (3d Cir. 1995) (citing Stewart Org., Inc. v. Ricoh Corp., 487
U.S. 22, 30-31 (1988)).
For the reasons stated above, the Court finds that in
this case, principles of fairness, comity, and efficiency favor
denying the plaintiff’s motion for voluntary dismissal or, in the
alternative, to transfer or stay the action.
The parties have
actively litigated this case for over a year, and this Court has
expended time and energy in becoming familiar with the facts and
11
arguments.
To dismiss, transfer, or stay at this point would be
a waste of the Court’s efforts.
C.
Defendants’ Cross-Motion to Enjoin CollegeSource
AcademyOne asks the Court to enjoin CollegeSource from
proceeding in the California Action.
Although the Court shares
AcademyOne’s concern regarding duplicative parallel litigation,
there is no precedent for a second-filed court enjoining
prosecution of a first-filed lawsuit.
The Third Circuit has stated that under the first-filed
rule, it is “the duty of the court first obtaining jurisdiction
to enjoin the prosecution of the subsequent proceedings in the
other court.”
Compagnie des Bauxites de Guinea v. Ins. Co. of N.
Am., 651 F.2d 877, 887 n.10 (3d Cir. 1981) (citing Triangle
Conduit & Cable Co., Inc. v. Nat’l Elec. Prods. Corp., 125 F.2d
1008, 1009 (3d Cir.), cert. denied, 316 U.S. 676 (1942))
(emphasis added).
AcademyOne has cited no Third Circuit
precedent supporting the issuance of an injunction by the secondfiled court, and the Court is not aware of any.
In Atlantis Petroleum, LLC v. Getty Petroleum
Marketing, Inc., despite concerns about comity, Judge Surrick
granted a motion for a temporary restraining order enjoining
prosecution of a first-filed suit in New York.
No. 11-2517, 2011
WL 1532378, at *4-5 (E.D. Pa. Apr. 19, 2011).
However, that case
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is distinguishable from the instant case.
Atlantis Petroleum
implicated the Petroleum Marketing Protection Act.
That statute
requires courts to grant preliminary injunctions for petroleum
franchisees threatened with termination of their franchises if
the franchisee meets the more lenient statutory standard for
injunctive relief.
See id. at *5 (“The statutory scheme states
that if a franchisee demonstrates that it is entitled to an
injunction, courts do not have discretion to withhold it.”)
Because Judge Surrick found that the franchisee had met the
statutory standard for injunctive relief, that court granted the
restraining order.
Here, there is no such statute requiring - or
even enabling - injunctive relief.
Thus, Atlantis Petroleum does
not provide support for an injunction from this Court.
Non-binding case law from other circuits also does not
provide clear authority supporting the power of a second-filed
court to restrain parties from proceeding with a first-filed
suit.
Compare Cenergy Corp. v. Bryson Oil & Gas P.L.C., 657 F.
Supp. 867, 870-71 (D. Nev. 1987) (“[O]nly the court which has
initial jurisdiction over the parties and the subject matter has
the power to enjoin subsequent lawsuits.”) with Nat’l Patent Dev.
Corp. v. Am. Hosp. Supply Corp., 616 F. Supp. 114, 121 (S.D.N.Y.
1984) (second-filed court grants cross-motion to stay action in
California) and William Gluckin & Co. v. Int’l Playtex Corp., 407
F.2d 177, 179-80 (2d Cir. 1969) (finding that district court’s
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issuance of a preliminary injunction restraining prosecution of a
first-filed suit was not an abuse of discretion).
The lack of clarity on this injunctive power is
consistent with the Third Circuit’s warning that federal courts
are reluctant to enjoin the prosecution of litigation in general.
Hoeber v. Local 30, 939 F.2d 118, 126 n.13 (3d Cir. 1991) (citing
Bill Johnson’s Restaurants, Inc. v. NLRB, 461 U.S. 731 (1983));
see also Transcore, L.P. v. Mark IV Indus. Corp., No. 09–2789,
2009 WL 3365870, at *8 (E.D. Pa. Oct. 15, 2009) (noting “the
general judicial reluctance to enjoin a party from proceeding
with a suit in another district”).
Given that reluctance, the
Court denies the defendant’s cross-motion to enjoin.
Admittedly, denying the cross-motion to enjoin leaves
open the possibility of duplicative litigation in this district
and in the Southern District of California.
However, either
party can move for appropriate relief in the California Action,
whether to dismiss or stay that action in favor of this one, or
for that court to enjoin the prosecution of this action.
See
Church of Scientology v. U.S. Dep’t of Army, 611 F.2d 738, 749-50
(9th Cir. 1979) (deferring to a second-filed court’s decision to
proceed on the merits); SKF USA, Inc. v. Miller, No. 10-4625,
2011 WL 940817, at *5 (E.D. Pa. Mar. 16, 2011) (dismissing firstfiled action in favor of second-filed action).
Therefore, because there is no precedential authority
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enabling this Court to enjoin the prosecution of the California
Action, and because the parties are not without tools to remedy
the possibility of duplicative litigation, the Court denies the
defendant’s cross-motion to enjoin.
An appropriate order shall issue separately.
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